Courtney and Clarissa are equal partners (50%/50%) in Rockies, LLC, an entity taxed as a partnership.  The Rockies LLC agreement provides that all allocations of income, gain, loss, and deduction are to be made equally between Courtney and Clarissa.  Rockies sells and repairs snowboards.  Rockies had the following items of income and expense for its taxable year ended December 31, 2023.   Gross receipts from snowboard sales: $1,122,500 Cost of goods sold: $400,000 Gross receipts from snowboard repairs: $182,500 Salaries: $255,000 Depreciation: $42,500 Amortization: $17,500 Utility expenses: $30,000 Investment interest expense: $8,750 Gain from the sale of equipment (held 4 years) Section 1245 gain (recapture): $50,000 Section 1231 gain: $5,000 Dividends paid by U.S. corporation: $40,000 Charitable contributions: $16,250 Tax-exempt interest income: $5,000 Long-term capital gain on sale of land: $38,750 Long-term capital gain on sale of Beta stock: $11,250 Short-term capital loss on sale of Alpha stock: $5,000 Short-term capital gain on sale of Omega stock: $68,000   Assume the same facts as above.   Further assume that at the beginning of Rockies’ taxable year, Courtney had a book and tax capital account of $150,000.   A. What is Courtney’s share of taxable income and separately stated items. B. What are Courtney’s updated book and tax capital accounts at the end of the tax year?

CONCEPTS IN FED.TAX.,2020-W/ACCESS
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ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter3: Income Sources
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Courtney and Clarissa are equal partners (50%/50%) in Rockies, LLC, an entity taxed as a partnership.  The Rockies LLC agreement provides that all allocations of income, gain, loss, and deduction are to be made equally between Courtney and Clarissa.  Rockies sells and repairs snowboards.  Rockies had the following items of income and expense for its taxable year ended December 31, 2023.

 

  • Gross receipts from snowboard sales: $1,122,500
  • Cost of goods sold: $400,000
  • Gross receipts from snowboard repairs: $182,500
  • Salaries: $255,000
  • Depreciation: $42,500
  • Amortization: $17,500
  • Utility expenses: $30,000
  • Investment interest expense: $8,750
  • Gain from the sale of equipment (held 4 years)
    • Section 1245 gain (recapture): $50,000
    • Section 1231 gain: $5,000
  • Dividends paid by U.S. corporation: $40,000
  • Charitable contributions: $16,250
  • Tax-exempt interest income: $5,000
  • Long-term capital gain on sale of land: $38,750
  • Long-term capital gain on sale of Beta stock: $11,250
  • Short-term capital loss on sale of Alpha stock: $5,000
  • Short-term capital gain on sale of Omega stock: $68,000

 

Assume the same facts as above.   Further assume that at the beginning of Rockies’ taxable year, Courtney had a book and tax capital account of $150,000.

 

A. What is Courtney’s share of taxable income and separately stated items.

B. What are Courtney’s updated book and tax capital accounts at the end of the tax year?

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